In motor insurance, what best defines a deductible?

• A. Is the portion of the claim the insured pays before policy benefits apply
• B. Is the portion of the claim the insurer pays first
• C. Is the total policy limit
• D. Is the annual premium

Answer: (B)

In motor insurance, a deductible is the amount you must pay out of pocket toward a claim before your insurer contributes toward the loss. For example, if you have a $500 deductible and there’s a $2,500 repair bill, you would pay $500 and the insurer would cover the remaining $2,000 (subject to policy limits). If the claim amount is less than the deductible, you cover the full cost and the insurer pays nothing. The deductible is separate from the policy’s total limit (the maximum the insurer will pay) and from the annual premium (the cost to maintain the policy).